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Every Amazon Investor Should Keep an Eye on This Number

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Amazon (Nasdaq: AMZN) It has been a profitable stock for most of its public existence, barring the natural ebb and flow of any asset. The company tends to achieve its goals, and regularly finds new companies to control, generating new revenue streams. Right now, the company is focused on generative artificial intelligence (AI), a high-margin business that will increase top- and bottom-line profits.

This is important, because if you take a look at its financial reports and its stock price, you’ll notice that Amazon’s stock price closely tracks changes in its stock. Net income.

Amazon management likes to focus on it Operating incomeThis metric is highlighted at the beginning of each of its quarterly reports. This is because operating income includes expenses related to taxes and other items that do not have a strong impact on the company’s operations.

This may be the financially responsible thing to do. In fact, Warren Buffett, the legend himself, who also has a stake in Amazon, called the net income metric “worse than useless.” Instead, he focuses on operating income, which he agrees gives a more complete picture of a company’s financial health.

However, not every investor is as wise as Buffett, and in any case, the merits of focusing on operating income versus net income can be debated. The choice also affects valuation metrics like the P/E ratio, so whether or not net income is the better metric to go is important to the market. Amazon’s stock price tracks net income much more closely than revenue or operating income.

Amzn Data by YCharts.

Net income is reported later in the financial statements, but investors should find it and note it. In the third quarter, net income increased from $9.9 billion in 2023 to $15.3 billion in 2024. This should not be viewed alone, but rather as part of the whole picture.

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